Classical Methods for the Modern Lawyer
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CLASSICAL METHODS FOR THE MODERN LAWYER: THE INTERPLAY BETWEEN ETHICS, MORALITY AND EFFICACY IN THE TRANSACTIONAL CONTEXT Gerald T. Nowak, P.C. PRACTISING LAW INSTITUTE: DRAFTING AND NEGOTIATING CORPORATE AGREEMENTS 2011 Chicago, Illinois -- February 10, 2011 K&E 14501746.2 Gerald T. ("Jerry") Nowak is a corporate partner in the Chicago office of Kirkland & Ellis LLP. He has a broad transactional practice, including capital markets transactions, M&A transactions and corporate governance matters. His capital markets practice focuses on complex securities matters, including initial public offerings, high yield offerings, spin-offs, tender offers and investment grade debt offerings. His M&A practice includes public and private acquisitions for private equity funds and public companies. He holds a B.A. from Michigan State University, an M.B.A from Auburn University and a J.D. from the University of Michigan Law School, none of which are in philosophy. ii K&E 14501746.2 I. INTRODUCTION A. Ethics, Morality and Efficacy As lawyers, we are bound by a code of ethics that regulates both what we do and how we do it. There are any number of technical rules that govern a lawyer’s behavior, from rules limiting lawyer advertising to rules regulating conflicts of interest, and, apropos to this article, rules regulating how we conduct ourselves in transactional negotiations. Much of the substance of the ethical rules can be summed up by the Cub Scout’s exhortation to “do your best” and “tell the truth.” The rules that govern a lawyer’s behavior are commonly referred to as “legal ethics” or the “ethical rules.” This nomenclature can be confusing to those of us who, prior to being taught otherwise, tended to conflate “ethics” with “morality.” At least in the legal arena, the two bear only a passing resemblance to one another. The ethical rules require a minimum standard of conduct that, as we will see, is not particularly demanding. The precise definitions of ethics and morality are well beyond the scope of this article. Nevertheless, a brief discussion of ethics and morality will be useful both as a counterpoint to the ultimate conclusion of this article and as a measure of just how far the ethical rules fall short of what most consider ethical or moral behavior. I will use Aristotle’s Nichomachean Ethics and West Point’s honor code as reference points for what it means to be “ethical” in the classical sense of the word. I will also discuss the advantages of using the techniques of classical rhetoric in the corporate transactional context. Through that discussion, I will argue for why and how holding oneself to a higher standard of truthfulness is actually both in a lawyer’s self interest and in the client’s self interest. Ultimately, being seen as an honest negotiator is advantageous both to you as a lawyer and to your client, and thus is both desirable in its own right and entirely consistent with the goal of being an effective negotiator for your client. 1 K&E 14501746.2 B. Legal Ethics As stated above, a transactional lawyer’s ethical obligations basically come down to two guiding principles: first, do a good job for your client, and second, refrain from lying in doing so. In the words of the ABA’s model rules of professional conduct, “[a]s [a] negotiator, a lawyer seeks a result advantageous to the client but consistent with requirements of honest dealings with others.” In that regard, there are a couple of specific rules that apply: First, we should be competent: “Rule 1.1 Competence. A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” And second, we should tell the truth: “Rule 4.1 Truthfulness In Statements To Others. In the course of representing a client a lawyer shall not knowingly: (a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client… .” This rule has been expounded upon by the ABA in the context of the transactional lawyer: “ABA Formal Opinion 06-439. [S]tatements regarding a party’s negotiating goals …, as well as statements that can fairly be characterized as ‘puffing,’ are ordinarily not considered ‘false statements of material fact’… .” While the Cub Scout’s oath to “do your best” translates pretty well into Rule 1.1, it is doubtful that many pack leaders are instructing their scouts in the nuances of Rule 4.1. To begin, note that the rule only prohibits false statements of material fact or law. Immaterial falsehoods appear to be permitted, albeit not encouraged. But more tellingly, note the prohibition on omissions. Omissions are only prohibited where the failure to make a disclosure is necessary to avoid assisting a client in a criminal or fraudulent act. As a moral code, this rule fails the red face test. But consider it in context. As lawyers, we are an agent for the client. Rule 4.1 tells us at a minimum what we must do and what we can’t do regardless of our client’s interests. We need to dig a little deeper to understand how we should behave when there are multiple ethically permissible choices available. 2 K&E 14501746.2 C. Ethics and Morality Ethics and morality are not synonyms. Not only are they not the same thing, but the terms themselves have different meanings to different people. Over history, there have been any number of definitions of ethics or ethical codes. As one notable example, in his Nichomachean Ethics, Aristotle postulated that the goal of ethics was to achieve the highest end, which to him was human happiness. All activities were but a means to that end. Happiness was achieved by living in accordance with appropriate virtues, including courage, justice, temperance, modesty and truthfulness. Each of these virtues was not, as is common in modern discourse, at the opposite end of the spectrum from its correlative vice. Rather, each occupied the middle ground, or mean, between two extremes, neither of which were desirable. So, for example, in the realm of fear and confidence, courage is the appropriate mean between rash action and cowardice. Similarly, truthfulness is the appropriate mean between boastfulness and understatement. Note that ethical conduct, at least to Aristotle, bears only a passing resemblance to what many would call “morality.” It is more like Jeremy Bentham’s philosophy of “utilitarianism,” which in fact owed much to Aristotle’s worldview. In some contexts, the notion of ethical behavior takes on heroic proportions. In the military, particularly at military academies, people are expected to comport to a rigorous honor code that generally prohibits all forms of dishonesty. West Point’s formulation of the honor code is representative in that regard: “A Cadet will not lie, cheat, or steal, nor tolerate those who do.” As in all things military, there are rules and regulations that back up that simple statement, but without diluting the rigor of the basic rule. So, for example, under West Point’s honor code, “lying” is defined as deliberately deceiving another by stating an untruth or by any direct form of communication, including the telling of a partial truth and the vague or ambiguous use of information or language with the intent to deceive or mislead. Compare that to ABA’s Rule 4.1. Similarly, “tolerating” is defined as failing to report an unresolved incident with honor implications to proper authority within a reasonable length of time. Unyielding in its ethical simplicity. 3 K&E 14501746.2 At the end of the day, morality is one of those terms that everyone uses, everyone knows what they mean when they say it, but in fact has no unambiguous definition. According to Merriam-Webster (paraphrased), “Morality” is a doctrine or system of behavior relating to principles of right and wrong or sanctioned by or operative on one's conscience or ethical judgment. This definition, of course, begs the question of what is “right” and what is “wrong”? That question is often profoundly difficult, as in, for example, the case where you have one too many persons riding in a sinking lifeboat. But in this context, the question is not that difficult. It is virtually always, regardless of what code you live by, morally right to be forthright and honest and morally wrong to be dishonest or duplicitous. The question is not whether it is right to be honest, but whether it is smart. Is it advantageous to us as lawyers and to our clients to be honest and forthright? That is where classical rhetoric comes in. D. Classical Rhetoric What is “rhetoric”? Put simply, rhetoric is the art of persuasion, deconstructed and analyzed for maximum effect. It formed the basis of an elite education in classical Greece and Rome and for centuries was an important part of any advanced liberal education in western Europe and the United States. Aristotle wrote what is still the defining treatise on rhetoric. Cicero studied and practiced rhetoric at the highest level. The Founding Fathers were highly schooled in rhetorical principles. Rhetoric has a long and distinguished pedigree. Somewhere along the way, rhetoric as a field of study came into disfavor -- think of the phrases “empty rhetoric” (useless at best, misleading at worst) and “rhetorical question” (a useless question that does not merit an answer). To the ancients, rhetoric did not carry a connotation of “emptiness.” The ancients, including Aristotle, Cicero and others whose names are not typically associated with vacuity of any kind, recognized that there is value in consensual agreement, and that the alternative is often either a deadweight loss associated with failing to reach agreement, or worse (in the political sphere) the imposition by force of what could not be agreed by rhetorical persuasion.